RBI (Pre-payment Charges on Loans) Directions, 2025
Sep 23, 2025/
Complinova Team/
RBI-Regulations
Reserve Bank of India (RBI) has issued a comprehensive and transparent framework through its Directions on Prepayment Charges on Loans, 2025. These Directions are applicable to all loans and advances sanctioned or renewed on or after January 1, 2026. This framework addresses varying practices among regulated entities concerning these charges, particularly for Micro and Small Enterprises (MSEs).
● Applicability -
Directions are applicable to:
▸ All commercial banks (excluding Payments Banks), co-operative banks
▸ NBFCs
▸ All India Financial Institutions
● Instructions on levy of pre-payment charges on all floating rate loans and advances
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Loans granted to Individuals (other than business purpose)
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No prepayment charges levied
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Loans granted to Individuals & Micro and Small Enterprises (MSEs) (for business purpose)
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i. No prepayment charges by:
• Commercial Banks (excluding Small Finance Banks, Regional Rural Banks, and Local Area Banks)
• Tier 4 Primary (Urban) Co-op Banks
• NBFCs – Upper Layer
• All India Financial Institutions
ii. No prepayment charges for loans ≤ Rs. 50 lakh by:
• Small Finance Banks
• Regional Rural Banks
• Tier 3 Primary (Urban) Co-op Banks
• State and Central Co-op Banks
• NBFCs – Middle Layer
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Dual/special rate (combination of fixed and floating rate) loans
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Depending upon whether the loan is on floating rate at the time of pre-payment
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● Other Requirements -
- Disclosure: The applicability of pre-payment charges shall be clearly disclosed in the sanction letter, loan agreement, and Key Fact Statement (KFS), where applicable.
- No retrospective charges: Regulated Entities (REs) shall not levy any charges/fees retrospectively at the time of pre-payment of loans, which were waived off earlier by the RE.
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